IDEAS home Printed from https://ideas.repec.org/p/unm/unumer/2021031.html
   My bibliography  Save this paper

Positioning firms along the capabilities ladder

Author

Listed:
  • Coad, Alex

    (Waseda Business School)

  • Mathew, Nanditha

    (UNU-MERIT, Maastricht University)

  • Pugliese, Emanuele

    (European Commission, Joint Research Centre (JRC))

Abstract

We develop and apply a novel methodology for quantifying the capability development of firms, and putting these capabilities (and hence also the firms) in a hierarchy, that we refer to as their position on the capabilities ladder. Our nestedness algorithm, inspired by biology and network science, defines a capability as complex if it is performed by only a few firms at the upper rungs of the ladder. We analyze balance sheet and innovation data of almost 40,000 Indian firms for the time period 1988-2015, and observe significant nestedness. Lower rungs of the capabilities ladder correspond to basic managerial and production capabilities. Mid-level rungs correspond to internationalization and acquiring absorptive capacity. Higher level rungs are more related to M&A and innovation. ICT capabilities have become more fundamental lower-level rungs on the capabilities ladder in recent years. We find that capability ranking can explain future growth patterns and survival probability of firms, summing up in one number their future potential trajectories.

Suggested Citation

  • Coad, Alex & Mathew, Nanditha & Pugliese, Emanuele, 2021. "Positioning firms along the capabilities ladder," MERIT Working Papers 2021-031, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2021031
    as

    Download full text from publisher

    File URL: https://unu-merit.nl/publications/wppdf/2021/wp2021-031.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ashish Arora & Anand Nandkumar, 2011. "Cash-Out or Flameout! Opportunity Cost and Entrepreneurial Strategy: Theory, and Evidence from the Information Security Industry," Management Science, INFORMS, vol. 57(10), pages 1844-1860, October.
    2. Wiebke Bartz-Zuccala & Pierre Mohnen & Helena Schweiger, 2018. "The Role of Innovation and Management Practices in Determining Firm Productivity," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(4), pages 502-530, December.
    3. Constance E. Helfat, 1997. "Know‐how and asset complementarity and dynamic capability accumulation: the case of r&d," Strategic Management Journal, Wiley Blackwell, vol. 18(5), pages 339-360, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mahka Moeen & Rajshree Agarwal, 2017. "Incubation of an industry: Heterogeneous knowledge bases and modes of value capture," Strategic Management Journal, Wiley Blackwell, vol. 38(3), pages 566-587, March.
    2. Shaikh, Ibrahim A. & O'Brien, Jonathan Paul & Peters, Lois, 2018. "Inside directors and the underinvestment of financial slack towards R&D-intensity in high-technology firms," Journal of Business Research, Elsevier, vol. 82(C), pages 192-201.
    3. Bruneel, Johan & Clarysse, Bart & Bobelyn, Annelies & Wright, Mike, 2020. "Liquidity events and VC-backed academic spin-offs: The role of search alliances," Research Policy, Elsevier, vol. 49(10).
    4. Dwibedy, Punyashlok, 2022. "Informal competition and product innovation decisions of new ventures and incumbents across developing and transitioning countries," Journal of Business Venturing Insights, Elsevier, vol. 17(C).
    5. Braguinsky, Serguey & Honjo, Yuji & 本庄, 裕司 & Nagaoka, Sadao & 長岡, 貞男 & Nakamura, Kenta & 中村, 健太, 2010. "Science-Based Business : Knowledge Capital or Entrepreneurial Ability? : Theory and Evidence from a Survey of Biotechnology Start-ups," IIR Working Paper 10-05, Institute of Innovation Research, Hitotsubashi University.
    6. Charlotte Bartels & Simon Jäger & Natalie Obergruber, 2024. "Long-Term Effects of Equal Sharing: Evidence from Inheritance Rules for Land," The Economic Journal, Royal Economic Society, vol. 134(664), pages 3137-3172.
    7. Malen, Joel, 2015. "Motivating And Enabling Firm Innovation Effort: Integrating Penrosian And Behavioral Theory Perspectives On Slack Resources," Hitotsubashi Journal of commerce and management, Hitotsubashi University, vol. 49(1), pages 37-54, October.
    8. Grimpe, Christoph & Kaiser, Ulrich & Sofka, Wolfgang, 2018. "Innovating for the Better? The Role of Advocacy Group Work Experience for Employee Pay," IZA Discussion Papers 11649, Institute of Labor Economics (IZA).
    9. Annita Nugent & Ho Fai Chan & Uwe Dulleck, 2022. "Government funding of university-industry collaboration: exploring the impact of targeted funding on university patent activity," Scientometrics, Springer;Akadémiai Kiadó, vol. 127(1), pages 29-73, January.
    10. Malik, Omar R., 2008. "Adapting to market liberalization: The role of dynamic capabilities, initial resource conditions, and strategic path choices in determining evolutionary fitness of Less Developed Country (LDC) firms," Journal of International Management, Elsevier, vol. 14(3), pages 217-231, September.
    11. Anoop R. Menon & Dennis A. Yao, 2017. "Elevating Repositioning Costs: Strategy Dynamics and Competitive Interactions," Strategic Management Journal, Wiley Blackwell, vol. 38(10), pages 1953-1963, October.
    12. Joern H. Block & Christian O. Fisch & Mirjam van Praag, 2017. "The Schumpeterian entrepreneur: a review of the empirical evidence on the antecedents, behaviour and consequences of innovative entrepreneurship," Industry and Innovation, Taylor & Francis Journals, vol. 24(1), pages 61-95, January.
    13. Andrew A. King & Christopher L. Tucci, 2002. "Incumbent Entry into New Market Niches: The Role of Experience and Managerial Choice in the Creation of Dynamic Capabilities," Management Science, INFORMS, vol. 48(2), pages 171-186, February.
    14. Isabelle Le Breton-Miller & Danny Miller, 2015. "The paradox of resource vulnerability: Considerations for organizational curatorship," Strategic Management Journal, Wiley Blackwell, vol. 36(3), pages 397-415, March.
    15. Hans van Kranenburg & Gerrit Willem Ziggers, 2013. "Dynamic competition and ambidexterity," Chapters, in: Ruth Towse & Christian Handke (ed.), Handbook on the Digital Creative Economy, chapter 6, pages 57-66, Edward Elgar Publishing.
    16. Nicolov Mirela, 2012. "Regional Analysis Of Financial Resources Involved In Research Development And Innovation (Rdi) Sector In Romania In The Last Decade '"Study Done On Macroregions," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 250-255, December.
    17. Brian T. McCann & Mona Bahl, 2017. "The influence of competition from informal firms on new product development," Strategic Management Journal, Wiley Blackwell, vol. 38(7), pages 1518-1535, July.
    18. Jiao Luo & Aseem Kaul & Haram Seo, 2018. "Winning us with trifles: Adverse selection in the use of philanthropy as insurance," Strategic Management Journal, Wiley Blackwell, vol. 39(10), pages 2591-2617, October.
    19. Chong Kyoon Lee & Griffin W. Cottle & Sharon A. Simmons & Johan Wiklund, 2021. "Fear not, want not: Untangling the effects of social cost of failure on high-growth entrepreneurship," Small Business Economics, Springer, vol. 57(1), pages 531-553, June.
    20. Agarwal, Rajshree & Shah, Sonali K., 2014. "Knowledge sources of entrepreneurship: Firm formation by academic, user and employee innovators," Research Policy, Elsevier, vol. 43(7), pages 1109-1133.

    More about this item

    Keywords

    Capabilities; Competences; Complexity; Balance sheet data; Resources;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • D2 - Microeconomics - - Production and Organizations
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unm:unumer:2021031. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ad Notten The email address of this maintainer does not seem to be valid anymore. Please ask Ad Notten to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/meritnl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.